Corporation tax 2026/27: 19%, 25% and marginal relief explained
A limited company pays 19% corporation tax on profits up to £50,000 and 25% above £250,000. In between, marginal relief makes every extra pound cost 26.5p. Worked examples at £50,000, £60,000 and £100,000 profit, associated companies and the payment deadlines.
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A limited company pays corporation tax at 19% on profits of £50,000 or less and at 25% on profits above £250,000. Between the two, the company pays 25% minus marginal relief, so on £100,000 of profit the bill is £22,750, not £25,000.
Law as of 13 November 2026
The rates for the financial years starting 1 April 2026 and 1 April 2027 are set by Finance Act 2026 ss. 11 and 12. Marginal relief is in Corporation Tax Act 2010 Part 3A, with the formula in s. 18B and associated companies in ss. 18E and 18F.
The rates for 2026/27
Corporation tax runs on financial years from 1 April to 31 March, not on the 6 April tax year that applies to people. The rates are the same across the whole UK, Scotland included.
| Taxable profit | Rate | Financial years |
|---|---|---|
| £50,000 or less | 19% (small profits rate) | 1 April 2026 to 31 March 2027, and 1 April 2027 to 31 March 2028 |
| £50,001 to £250,000 | 25% minus marginal relief | same |
| Over £250,000 | 25% (main rate) | same |
The £50,000 is the lower limit and the £250,000 the upper limit. Both shrink if the company has associated companies or an accounting period shorter than 12 months (see below). Legal basis: Finance Act 2026 ss. 11 and 12. For the financial year from 1 April 2028, the same 25% and 19% are planned in Finance Bill 2026-27, which is still going through Parliament.
How marginal relief works
In the band between £50,000 and £250,000, HMRC first charges 25% on the whole profit and then takes off marginal relief:
Marginal relief = 3/200 × (£250,000 − profit)
This is the simple case: no associated companies, a 12-month accounting period and no dividends received from other companies. The full formula in Corporation Tax Act 2010 s. 18B is F × (U − A) × N ÷ A, where F is the fraction of 3/200, U the upper limit, A the augmented profits and N the taxable profits. Augmented profits are the taxable profits plus exempt dividends received from companies outside the group (s. 18L). Without such dividends, A and N are the same, and the formula becomes the simple one above.
The hidden rate of 26.5%
The tax at the lower limit is £50,000 × 19% = £9,500. The tax at the upper limit is £250,000 × 25% = £62,500. So the £200,000 in between costs £62,500 − £9,500 = £53,000 in tax, which is 26.5%. HMRC's own manual shows this calculation (CTM03925).
Each pound of profit between £50,000 and £250,000 costs 26.5p in corporation tax. And each pound of allowable cost in that band saves 26.5p.
Worked examples
All three companies have a 12-month accounting period ending in the 2026/27 financial year, no associated companies and no dividend income.
| Profit | Calculation | Corporation tax | Effective rate |
|---|---|---|---|
| £50,000 | £50,000 × 19% | £9,500 | 19.0% |
| £60,000 | £60,000 × 25% = £15,000; relief 3/200 × £190,000 = £2,850; £15,000 − £2,850 | £12,150 | 20.25% |
| £100,000 | £100,000 × 25% = £25,000; relief 3/200 × £150,000 = £2,250; £25,000 − £2,250 | £22,750 | 22.75% |
| £300,000 | £300,000 × 25% | £75,000 | 25.0% |
You can check the band figures with the 26.5% rate: at £100,000, the tax is £9,500 + (£100,000 − £50,000) × 26.5% = £9,500 + £13,250 = £22,750.
Associated companies: when the limits are divided
If you own or control more than one company, the £50,000 and £250,000 limits are shared. Each company divides them by the number of associated companies plus one.
A company is associated with another if one controls the other, or if the same person or persons control both. Control has the meaning it has for close companies (CTA 2010 ss. 450 and 451). It does not matter where the other company is resident, and a company counts even if it was associated for only part of the accounting period. Legal basis: CTA 2010 s. 18E.
| Associated companies | Lower limit | Upper limit |
|---|---|---|
| None | £50,000 | £250,000 |
| 1 | £25,000 | £125,000 |
| 2 | £16,666.67 | £83,333.33 |
| 3 | £12,500 | £62,500 |
Not counted (CTA 2010 ss. 18E and 18F):
- a company that carried on no trade or business at any time in the accounting period, such as a dormant company;
- a passive holding company that only holds shares in its 51% subsidiaries, has no income other than dividends it passes on to its shareholders, and has no gains or expenses.
Example: Priya owns two trading companies. Company A makes £60,000 profit. With one associated company, its limits are £25,000 and £125,000.
- £60,000 × 25% = £15,000.
- Marginal relief: 3/200 × (£125,000 − £60,000) = 3/200 × £65,000 = £975.
- Corporation tax: £15,000 − £975 = £14,025.
On its own, company A would pay £12,150. The second company costs it £1,875 a year.
Short accounting periods
An accounting period for corporation tax cannot be longer than 12 months. If it is shorter, the limits are reduced in proportion: a period of about six months has limits of about £25,000 and £125,000.
The first accounts of a new company often cover more than 12 months. Then the company files two Company Tax Returns: one for the first 12 months and one for the rest, each with its own limits.
If an accounting period straddles 1 April, the profit is split by the number of days in each financial year. For 2026/27 and 2027/28 the rates and limits are the same, so the split changes nothing.
When to pay and file
HMRC does not send a bill. The company works out its own corporation tax and pays it without a reminder.
| What | Deadline | Year end 31 March 2027 | Year end 31 December 2026 |
|---|---|---|---|
| Pay corporation tax (profits up to £1.5 million) | 9 months and 1 day after the end of the accounting period | 1 January 2028 | 1 October 2027 |
| File the Company Tax Return (CT600) | 12 months after the end of the accounting period | 31 March 2028 | 31 December 2027 |
The company must file a return even if it made a loss or has no corporation tax to pay. Profits over £1.5 million are paid in instalments during the year. HMRC charges interest on tax paid late and penalties for late returns.
The tax deadline is not the same as the deadline for the accounts at Companies House, which is 9 months after the year end.
How to reduce your corporation tax legally
You cannot choose a lower rate, but you decide what the taxable profit is made of. In the marginal relief band, each of these saves 26.5p per pound:
- Claim every allowable expense. Costs spent wholly and exclusively for the business reduce the profit (CTA 2009 s. 54).
- Pay a salary. Salary and employer National Insurance are deductible; dividends are not. For most single-director companies a salary of £12,570 is the best mix, as our guide to salary or dividends shows.
- Pay into a pension from the company. Employer contributions for a director or employee are an allowable expense when they are paid for the purposes of the trade (HMRC Business Income Manual BIM46035).
- Claim capital allowances. The Annual Investment Allowance lets the company deduct up to £1 million a year of most plant and machinery, such as computers, tools and vans, in full. Cars are excluded.
Money taken out as dividends comes from profit after corporation tax and is then taxed again at your dividend rates. The free salary and dividend calculator shows the corporation tax, the dividend tax and what you keep for your own profit.
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Frequently asked questions
How much corporation tax do I pay on £50,000 profit?
£9,500, which is 19% of £50,000, if the company has no associated companies and a 12-month accounting period. Above £50,000, marginal relief applies.
How much corporation tax do I pay on £100,000 profit?
£22,750. That is 25% of £100,000, which is £25,000, minus marginal relief of 3/200 × £150,000, which is £2,250.
How can I avoid paying 25% corporation tax?
Only profits above £250,000 pay the full 25%. Below that you can reduce the taxable profit legally with allowable expenses, salary, employer pension contributions and capital allowances. Each pound you deduct between £50,000 and £250,000 saves 26.5p.
I own two companies. Are the limits halved?
If you control both, yes: each company's limits drop to £25,000 and £125,000. A dormant company that does no business in the period does not count.
Is corporation tax different in Scotland?
No. Corporation tax rates and limits are the same across the UK. Only income tax on salary differs in Scotland.